Singapore Forgoes Adding Stimulus as Growth Tops Forecast

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Singapore's Economy
Diners sit at restaurant tables at the Lau Pa Sat food court as commercial buildings stand illuminated at night in the central business district city of Singapore. While cheaper crude has contributed to falling consumer prices, officials have said Singapore’s economy stands to benefit on the whole as a net oil importer. Photographer: Nicky Loh/Bloomberg

Singapore joined regional peers in refraining from easing monetary policy further after economic growth last quarter beat analysts’ estimates. The local dollar climbed.

The Monetary Authority of Singapore said Tuesday it will “maintain the policy of a modest and gradual appreciation” without adjusting the pace of its currency’s moves. Gross domestic product rose an annualized 1.1 percent in the three months through March from the previous quarter, the trade ministry said separately. The median estimate in a Bloomberg News survey was 0.2 percent.

A faltering growth outlook, coupled with the nation’s longest disinflation streak since the global financial crisis, had put pressure on the central bank to add to an unexpected January policy easing. While cheaper crude has contributed to falling consumer prices, officials have said Singapore’s economy stands to benefit on the whole as a net oil importer.

“It’s a reflection that growth is not at risk of falling beneath the government’s forecast,” said Wai Ho Leong, a Singapore-based economist at Barclays Plc. “It’s a recognition that the economy could benefit from lower oil in the second half of the year.”

The Singapore dollar jumped 0.7 percent to S$1.3619 against the U.S. currency as of 9:13 a.m. local time. It has fallen about 2.7 percent against the greenback this year.


Singapore is joining counterparts including Australia and India that in recent weeks have held off on adding to monetary easing executed earlier this year amid uncertainty over when the Federal Reserve will raise interest rates. Indonesia’s central bank will probably keep its benchmark reference rate unchanged in a decision today, according to a Bloomberg survey.

“Central bankers across the region are in wait-and-see mode because they’re still trying to gauge what the Fed is up to,” said Frederic Neumann, co-head of Asian economics research in Hong Kong at HSBC Holdings Plc. “Once the Fed’s tightening path becomes clear, Asian central bankers may resume their easing cycle,” given weaker growth in China and declining inflation, he said.

Singapore’s central bank, which uses the currency rather than interest rates to manage inflation, reduced the pace of the local dollar’s appreciation against those of its trade partners in an unscheduled decision on Jan. 28, after growth sagged in 2014 to its weakest in five years. Eight of 15 economists surveyed by Bloomberg predicted the MAS would maintain the overall policy stance today, while the rest forecast it would ease.

Mild Uplift

The MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of a currency band. It doesn’t disclose details on the basket, or the band or the pace of appreciation or depreciation.

“The outlook for the global economy has improved slightly, anchored by a stronger recovery in the G3,” the MAS said today, referring to the U.S., Japan and euro area. “The sustained, albeit uneven recovery in the global economy should provide a mild uplift to the external-oriented sectors in Singapore.”

The central bank reiterated its forecast for the economy to grow 2 percent to 4 percent this year.

The economy expanded 2.1 percent in the first quarter from a year earlier, matching the pace in the previous three months, the trade ministry said today. The median estimate in a Bloomberg survey was for a 1.7 percent gain.

Manufacturing shrank an annualized 2.3 percent in the first quarter from the previous three months, following a 2.5 percent contraction in the fourth quarter. Construction expanded 13.8 percent, while services fell 0.4 percent.

Today’s data are advance estimates computed largely from figures in the first two months of the quarter and may be revised later, the ministry said.

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